As the Morning News’s Bob Garrett reported this morning, the question of funny money came up at last night’s first public hearing of the budget conference committee. The budget only balances if billions of dollars worth of hoped-for Medicaid savings materialize, and Sylvester Turner questioned LBB officials on how likely that was to occur. He never got a good answer. Among the shakiest of these assumed savings are found in Rider 60 (page II-94 of CSHB1), which calls on HHSC commissioner Tom Suehs to request from the Obama administration a variety of Medicaid waivers–that is, permission to operate outside of the federally designated rules of the program–to allow us to deliver services more efficiently and hopefully save money. Here is the list:

a. that the state of Texas have greater flexibility in standards and levels of eligibility in Medicaid and CHIP programs; b. that the state of Texas design and implement benefit packages that target the specific health needs and reflect the geographic and demographic needs of Texas; c. that the state of Texas Medicaid and CHIP programs foster a culture of individual responsibility through the appropriate use of co-payments; d. that the state of Texas consolidate funding streams to increase accountability, transparency, and efficiency (consolidated funding streams should be considered for both hospital and long term care); e. that the federal government assume financial responsibility for 100 percent of the health care services provided to unauthorized immigrants; and f. that existing state and local expenditures be utilized to maximize federal matching funds.

Sounds good–except for item “a” which basically translates to: “serve fewer people,” and item “e” which is supposed to be funny, I guess–but how can we budget based on a wish list? Suehs has yet to even request these waivers, much less get them approved, and yet this rider chalks up $700 million in savings in general revenue, which is then allocated elsewhere in the budget. This is Jeff Skilling-Andy Fastow type accounting. Last week, I asked Senator Nelson, whose Medicaid subcommittee came up with this language, whether or not any other states had successfully obtained waivers of this sort. “I don’t know,” she said. Then I ran them by Garnet Coleman, a veteran Article II budget writer. “We asked for a waiver like this in 2007 and were denied by the Bush administration,” he recalled. “More than likely it will be denied by Obama, too. It’s not real money.” Lois Kolkhorst’s HB 13 directs HHSC to seek many of these same waivers, but the accountants at LBB declined to put a fiscal note on that one, citing “insufficient information.” They might just as well have claimed “inability to see into the future,” or possibly, “deficit of required optimism.” So why would the LBB sign off on this kind of faith-based accounting in the budget bill? And how can it get by the comptroller’s office, which has to certify that the budget balances before the governor signs it? For that matter, why would the comptroller certify an Article II budget that is widely acknowledged to shortchange caseload growth by $4 or $5 billion, guaranteeing an emergency supplemental appropriation in 2013? Because it’s what we do. We’ve heard a lot this session about raids on general revenue dedicated funds to balance the budget, but funny money in Article II has also become a standard crutch–or, as Reinhold Niebuhr put it, one of our “necessary illusions.” “I’ve served ten years on Appropriations and sat on four conference committees,” Coleman said, “and this has gotten worse and worse and worse.” NATE BLAKESLEE CORRECTION: This post has been updated to remove a reference to a putative revenue gain from “enhanced FMAP,” which is in the HB 13 wish list, but did not in fact make it into the Senate budget. I thank blog reader “Austinite” for pointing this out. NB